Nigeria’s Central Bank orders Money Transfer Operators (IMTOs) to pay out FX inflows only in naira

The Central Bank of Nigeria (CBN) has rolled out new guidelines mandating that transfers made through international money transfer operators (IMTOs) will now be paid out exclusively in naira, a move believed to be geared toward mopping up dollars to increase FX liquidity.

This directive, which is in line with regulations outlined in a circular dated January 31, 2024, affects major IMTOs such as Western Union, MoneyGram, Rapidtransfer, Ria, and other CBN-approved entities.

According to notices issued by several Nigerian banks to their customers, the new regulations stipulate that all inbound money transfers to Nigeria via the aforementioned IMTOs must be disbursed solely in naira, either through a bank account or in cash at the prevailing rate in the Nigerian Foreign Exchange Market (NAFEM).

“We would like to bring to your attention recent regulatory changes affecting international money transfers into Nigeria through Western Union, MoneyGram, Rapidtransfer, Ria, and other CBN approved IMTOS,” a notice from Ecobank reads.

“The Circular issued by the Central Bank of Nigeria (CBN) dated January 31, 2024, stipulates that ALL in-bound money transfers to Nigeria (via the above mentioned IMTOS) will be paid ONLY in Naira through a bank account or in cash at the prevailing rate in the Nigerian Foreign Exchange Market.”

However, there’s a caveat: only transfers below $200 can be paid out in cash, with amounts exceeding this threshold mandated to be credited to the recipient’s bank account.

“Transfers exceeding the Naira equivalent of $200 must be credited to the recipient’s bank account. Naira cash payment equivalent for amounts below $200 will require an acceptable means of identification,” information from Ecobank added.

This move by the CBN comes amidst recent denials from the apex bank that it plans to convert $30 billion in domiciliary accounts to naira. The CBN refuted these claims, labeling them as “false” and asserting that they aimed to incite panic in the foreign exchange market.

“This allegation is absolutely false and aims to trigger panic in the foreign exchange market, which the CBN is working assiduously to stabilize, as evidenced by its recent work and policy directions,” the apex bank noted in a press release.

This policy shift follows a series of other measures announced by the CBN, including restrictions on the operations of IMTOs to only inbound transfers, effectively halting outbound transfers. Additionally, banks and financial technology companies (fintechs) have been barred from offering international money transfer services.

While these measures are aimed at curbing foreign currency speculation and hoarding, concerns have been raised regarding their potential impact on Nigeria’s foreign exchange crisis. Analysts fear that mandating financial institutions to pay foreign currency remittances in naira could exacerbate the situation.

CBN Governor Yemi Cardoso sought to allay growing fears about the current FX market condition by stating that the foreign exchange market had seen a boost of over $1 billion in liquidity in recent days, attributing this to increased interest from foreign portfolio investors.

“We have already begun to see shifts in a positive direction. Indeed, we have already begun to see positive results with significant interest from foreign portfolio investors which was a concern that has already begun to supply the much-needed foreign exchange to the economy.

“For example, upward of the last few days. We have had over $1 billion that have come into the market. And this quite frankly is the answer to the question,” Cardoso said on Friday.

However, there are lingering concerns about the new directive’s potential to further restrict access to dollars, discouraging Nigerians in the diaspora from sending money home due to the forced conversion at official exchange rates, which are often lower than parallel market rates.